(i) Production refers to the creation or addition of value.
(ii) Production is a process of value adding.
(iii) In other words, production is also defined as the transformation of input into output.

(i) The inputs that a firm uses in the production process are called factors of production.
(ii) It includes factor inputs and non-factor inputs

(i) It is assumed that only two factors are used to produce a commodity.
(ii) Factors of production can be divided into small parts
(iii) Technique of production is constant.
(iv) Under the given techniques, factors of production can be used with maximum efficiency.

(i) Production function refers to the relationship among units of the factors of production (inputs) and the resultant quantity of a good produced (output).
(ii) Q = f(N, L, K, T);
Q = Quantity of output, N = Land, L = Labour, K = Capital, T = Technology

Labour represents services provided by the factor labour, which helps in yielding an income to the owner of the labour power. - Marshall.

(i) Land and labour are the primary factors.
(ii) Capital and organisation are the secondary factors.

Diseconomies of scale: The diseconomies of the scale are a disadvantage to a firm or an industry or an organisation. This necessarily increases the cost of production of a commodity or service.
These diseconomies are of two types:
a) Internal Diseconomies of Scale and
b) External Diseconomies of Scale
a) Internal Diseconomies of Scale: When the scale of production increases beyond optimum limit, its efficiency may come down.
b) External ·Diseconomies of Scale: The term "External diseconomies of scale" refers to the threat or disturbance to a firm or an industry from factor lying outside it. For example a bus strike prevents the easy and correct entry of the workers into a firm. Similarly the rent of a firm increases very much if new economic units are established in the locality.

Bohm - Bawerk defines it as "a Produced means of Production". All capital is wealth but all wealth is not capital.
Characteristics of Capital
i) is a man-made factor.
ii) Capital is mobile between places and persons.
iii) Capital is a passive factor of production.
iv) Capital's supply is elastic.
v) Capital's demand is a derived demand.
vi) Capital is durable.

The various Forms of Capital are:
a. Physical Capital or Material Resources
b. Maney Capital or Monetary Resources, and
c. Human Capital or Human Resources
a. Physical Capital: All man-made physical assets like plant and machinery, tools, buildings, roads, dams and communication, etc., are the various forms of physical capital.
Characteristics of Physical capital
i. It is an asset which has a specific life period.
ii. Physical capital asset can be used in production again and again. As a result, it undergoes wear and tear or depreciation.
iii. When used in production, it gives a series of annual income flows called annuities, during its life period.
Accumulation of more and more physical capital is called physical capital formation.
b. Money Capital: The investment that is made in the form of money or monetary instruments is called money capital. A household saves its income in the form of bank deposits, shares and securities or other monetary instruments. These are the sources of money capital.
c. Human Capital: Human capital refers to the quality of labour resources, which can be improved through investments in education, training, and health. Higher the investments in human capital, higher will be the productivity.

Factors of production are broadly classified into primary factors and derived factors. Man (Labour) acts upon Nature (Land) to produce goods and services and wealth. These two factors (Land and Labour) are naturally given and without them no goods can be produced. These are called primary factors. Capital and organisation are derived from the primary factors of production, and are called derived factors of production. These derived factors of production, when combined with the primary factors of production, raise total production.
According to the traditional classification, there are four factors of production. They are Land, Labour, Capital and Organisation.

Total Product:
(i) It refers to the total amount of commodity produced by combination of all inputs in a given period of time.
(ii) It can be calculated in two ways
TP = AP x N (or) AP = TP / N
Average Product:
(i) It refers to the output per unit of the input (or) 
\(AP=\frac { TP }{ Q } (or)N\)
(ii) It is the result of the total product divided by the total output.

(i) Capital is man-made.
(ii) Capital is mobile between places and persons.
(iii) Capital is a positive factor of production.
(iv) Capital's supply is elastic.
(v) Capital's demand is derived demand.
(vi) Capital is durable.

There are five types of elasticity supply. There are,
(1) Relative Elastic Supply: (ES> 1)
(i) The co-efficient of elastic supply is greater than 1 (ES> 1)
(ii) A unit change in the price causes more than one percent change in quantity supply of the commodity.

(2) Unitary Elastic Supply: (ES = 1)
(i) The co-efficient of elastic supply is equal to one (ES = 1)
(ii) A unit change in the price causes an equal change in quantity supply is called elastic supply.

(3) Relatively Inelastic Supply: (ES < 1)
(i) The co-efficient of elasticity is less than one (ES < 1)
(ii) A unit change in the price causes and less than one percent change in the quantity supply.

(4) Perfectly Inelastic Supply: (ES = 0) .
(i) The co-efficient of elasticity is equal to zero (ES = 0)
(ii) A unit change in the price causes no change in the quantity supply.

(5) Perfectly elastic supply: (ES= =)
(i) The co-efficient of elasticity of supply is infinity (ES = DC)
(ii) A unit change in the price causes an infinite change in the quantity supply.

(i) Labour is the animate factor of production.
(ii) It is an active factor of production
(iii) Labour implies several types
(iv) Labour is perishable
(v) Labour is inseparable from the labourer
(vi) Labour is less mobile between places and occupations.
(vii) Labour is a means as well as ends
(viii) Labour units are heterogeneous.
(ix) Supply of labour determines its reward
(x) Individual labour has weak bargaining power.